What are the conditions of static equilibrium?
static equilibrium: The state in which a system is stable and at rest. To achieve complete static equilibrium, a system must have both rotational equilibrium (have a net torque of zero) and translational equilibrium (have a net force of zero).
What does the equilibrium price tell us?
Equilibrium price is a common economics term that refers to the exact price at which market supply equals market demand. Selling goods and services at the equilibrium price point leads to optimized profit for a business.
What is meant by short run equilibrium?
Definition. A short run competitive equilibrium is a situation in which, given the firms in the market, the price is such that that total amount the firms wish to supply is equal to the total amount the consumers wish to demand.
What is the equilibrium output?
Output is at its equilibrium when quantity of output produced (AS) is equal to quantity demanded (AD). The economy is in equilibrium when aggregate demand represented by C + I is equal to total output.
What is short run equilibrium GDP for this economy explain?
Short-run macroeconomic equilibrium occurs when the quantity of real GDP demanded equals the quantity of real GDP supplied at the point of intersection of the AD curve and the SAS curve. In short-run equilibrium, real GDP can be greater than or less than potential GDP.
What happens when GDP is above equilibrium?
Above full employment equilibrium describes a situation in which an economy’s real gross domestic product (GDP) is higher than usual. An overly active economy creates more demand for goods and services, which pushes prices and wages up as companies increase production to meet that demand.
How do you find equilibrium real GDP?
To find the level of equilibrium real national income or GDP, you simply find the intersection of the AE curve with the 45° line. The levels of real GDP that correspond to these intersection points are the equilibrium levels of real GDP, denoted in Figure as Y 1, Y 2, and Y 3.
What is equilibrium real GDP?
Macroeconomic equilibrium occurs when the quantity of real GDP demanded equals the quantity of real GDP supplied at the point of intersection of the AD curve and the AS curve. If the quantity of real GDP supplied exceeds the quantity demanded, inventories pile up so that firms will cut production and prices.
Why AS curve is 45 degree?
The reason why these diagrams have this 45-degree line is that for every point on the line, the value of whatever is being measured on the x-axis is equal to the value of whatever is being measured on the y-axis. Equilibrium national income occurs where Y = E, and this would be every point on the 45 degree line.
How does the 45 degree model show the equilibrium income in the economy?
The 45-degree line shows all points where aggregate expenditures and output are equal. The aggregate expenditure schedule shows how total spending or aggregate expenditure increases as output or real GDP rises. The intersection of the aggregate expenditure schedule and the 45-degree line will be the equilibrium.
What does the 45-degree line indicate?
The 45-degree line shows where aggregate expenditure is equal to output. This model determines the equilibrium level of real gross domestic product at whichever point aggregate expenditures are equal to total output. In a Keynesian cross diagram, real GDP is shown on the horizontal axis.